Irish Permanent has pleased the market with a stronger-than-expected half-year performance. In the six months to the end of June, the State's biggest mortgage lender reported a 20.5 per cent rise in pre-tax profits to £31.3 million, ahead of analysts' forecasts.

Buoyed by the continued strong demand for mortgages and a healthy contribution from its subsidiary businesses, chief executive, Mr Roy Douglas, signalled further growth in the rest of 1998. The figures were well received by the market, sending Irish Permanent shares higher. By close of business, the shares had gained almost 111/2p on the Dublin market, ending at 850p.

Irish Permanent is proposing to pay an interim dividend to shareholders of 6.1p, an increase of 33 per cent on 1997. Earnings per share increased by 26.4 per cent to 24.4p.

Group loans and advances to customers surged ahead, increasing to £4.1 billion from £3.8 billion at the end of 1997, a rise of 9.5 per cent. Mortgages represented 84 per cent of all loans, growing to £3.5 billion in the six-month period. The group's total assets expanded to £6.8 billion from £6.1 billion at the end of 1997, up 11.6 per cent.

Income from its core lending and deposit taking business grew, rising by 7.5 per cent to £57 million from £53 million, despite falling margins. Most of the increase was due to the strong growth in lending, including residential and commercial mortgages, and car finance.

Dealing profits were also stronger at £1.4 million and its fortunes were further boosted by the sale of some of its portfolio of financial shares, which realised £2.6 million. Other income was sharply ahead, contributing £15.1 million for the six months, an increase of 58.9 per cent on 1997.

This was strongly boosted by the increased contribution from its Irish Progressive life assurance subsidiary, with earnings of £8 million, compared with £5.6 million in the same period last year. Included in those earnings is a £1.8 million gain due to changes in the way its embedded value is determined.

Irish Permanent Finance reported a 42.3 per cent increase in profits to £2.5 million, while profits at Guinness & Mahon grew by 14.6 per cent to £500,000. In Britain, its CHL subsidiary contributed profits of £1.8 million, while its Isle of Man deposit operation produced profits of £800,000. After tax, the group recorded a 26.5 per cent increase in profits to £23 million.

Its cost/income ratio improved from 56.6 per cent to 53.2 per cent, mainly due to strong earnings growth. Provisions for bad debts increased from £1.4 million to £2.5 million in line with higher lending volumes. Group total assets increased to £6.8 billion from £6.1 billion at the end of December.

Net interest margins - the profit on lending less the cost of funds - tightened from 2.4 per cent at the end of 1997 to 2.15 per cent at the end of June 1998. This was affected by the delay by the Central Bank in reducing short-term interest rates as well as the group's increased reliance on wholesale funding to meeting the demand for new mortgages and loans.